Dole Says He'd Downsize IRS, Aides Hint at $600 Billion Tax Cut

TOM RAUM

Jul. 25, 1996

HARRISBURG, Pa. (AP) _ Bob Dole, unveiling more key components of his economic package, said Thursday he would shrink the size of the IRS and limit its scope. The plan's centerpiece could be a six-year-tax cut of up to $600 billion, his aides suggested.

Wrapping up a two-day campaign trip in Pennsylvania, Dole told a business group here that his plan _ now expected to be released early next month _ also will propose a new capital gains tax exemption for small businesses.

Under the proposal, small business investments could be totally exempt from the capital gains tax so long the proceeds are ``invested in a new small business.''

Capital gains are the profits from the sale of real estate, stocks or certain other investments. They are currently taxed at a maximum rate of 28 percent.

Dole insisted he's made no decision on the overall economic package.

He has said the package would include a major tax cut, and he is known to be considering two major variations _ an across-the-board tax cut of up to 15 percent, or a repeal of the 1990 and 1993 tax increases with a return to the lower tax brackets that were in place in 1986.

Either plan would cost about $100 billion a year, or $600 billion over six years. That time length was selected because of GOP vows to balance the federal budget by the year 2002.

Dole's remarks came amid new published reports that he was considering a range of strategies to help pay for the $600 billion, including tax cuts valued up to $600 billion over six years.

The Washington Post, in Thursday's editions, quoted from what it said was a campaign working paper that suggested 40 percent of the additional revenue would come from projected stronger growth of the U.S. economy. It also listed closing corporate tax loopholes, stiffer enforcing of U.S. customs laws, reducing the federal workforce and further cuts in domestic spending.

The working paper, the existence of which was confirmed by Dole aides, amounts to a laundry list various proposals being looked at as components of the plan.

He called the Dole economic plan ``a work in progress'' and said details included in the working paper were ``entirely consistent with Bob Dole's long commitment to fighting excessive taxation.''

However, Dole has a long history of opposing massive tax cuts. Those close to the process have said he has expressed discomfort with a straightforward 15-percent across-the-board tax cut, which many of his political advisers are recommending.

And, Dole told his audience of small business owners on Thursday, ``We haven't announced it (the economic plan) yet. Others have. It's not my announcement and it's not my plan.''

However, he did tell his audience that limiting the size and power of the Internal Revenue Service would be one key component.

``We can downsize the IRS. We can make taxes fairer, flatter and simpler,'' Dole said.

Dole's attack on the IRS and his comments on simpler taxes reflect a theme that gained huge popularity earlier this year when proposed by magazine publisher and unsuccessful presidential candidate Steve Forbes.

Forbes in recent weeks has been to see Dole several times to offer economic advice.

Simplifying the tax code would be one way that Dole could shrink the IRS. Those close to the process said he is also considering changes in audit procedures, such as changing the burden of proof in audit cases from the taxpayer to the government.

Another proposal would allow interest and penalties to be waived in tax cases where the IRS is ruled to have been at fault.

Sen. Spencer Abraham, R-Mich., a close Dole adviser on economic issues and advocate of a simple 15-percent cut, said Thursday that such a plan would give more tax relief to the middle class _ while repealing the 1990 and 1993 tax breaks would favor higher income people.

Abraham, like others involved in the process, reiterated that Dole really hasn't made up his mind on basic issues like the kind of tax cut to advocate.

``I'm trying to make as much of a pitch for my approach as I can,'' Abraham said. But, he added, ``He's the man running for president, he has to make these decisions.''

Another problem facing Dole: He's already locked into a proposed tax credit for charities that fight poverty _ of $500 per person. That proposal, announced in May, would be in addition to the existing tax deduction for charitable giving. His own staff estimates the charity tax credit would cost $15 billion to $20 billion a year.

Other proposed tax cuts under Dole's consideration:

_Allowing workers to deduct their payroll Social Security taxes from their gross incomes.